Since options in a portfolio can offset one another partially in terms of the market risk, the margin calculation for option portfolios is complicated due to its combinatorial nature. We consider in this technical note margining balanced option portfolios, in which the number of long positions...

In this paper, we combine modern portfolio theory and option pricing theory so that a trader who takes a position in a European option contract and the underlying assets can construct an optimal portfolio such that at the moment of the contract's maturity the contract is perfectly hedged. We...

We propose a counter-cyclical initial margin model for option portfolios. Our model explores the intrinsic netting within a given portfolio of European options and outputs a constant upper bound of the maximum possible loss. This feature would allow option clearinghouses and regulators to gauge...